Alzamil Food Industries Expansion - Business Plan Example

• Alzamil Food Industries Expansion Plan
• Phase 1 – Planning the Global Business Enterprise

Alzamil food industry is a Saudi Arabian company that has the vision of expanding its family business in the global context. Thus, for its international expansion, it firstly desires to start from Amman, Jordan. The company has diverse interests and extensive capabilities that support it to offer a wide range of food products. The other factor that supports the company for its successful global expansion is its ability to witness innovations in high quality products and services, along with being able to meet the requirements of its customers. The company also has the benefit of extensive distribution of its products that supports it to gain greater market share. This capability of the company would also support it in its effective expansion in the global market (Zamil Foods, 2017; Bricault, 2012).

• Section 1 – Choice of Hosting Market

The target market considered for the expansion of Alzamil is Amman, Jordan. The reason behind the selection of Amman as the first international market for hosting is that it is geographically located near Saudi Arabia in comparison with the other countries of the world. The culture of Jordan is to a certain extent similar to that of Saudi Arabia. Besides, Amman has a considerable number of people from Saudi Arabia that gives the advantage to the company to target the market as many of them are familiar with the company’s brands. This would provide market base for the company and would ensure initial sales revenue from the market, which eventually would lead to the successful expansion accordingly. The company also has years of experience in Jordanian market that in turn supports in attaining confidence for its business process. For successful hosting in this market, at the initial stage, it is required to conduct a market research that will enable to derive an understanding of the choice along with requirements of the customers in the city. The market research can be conducted through online survey. The company can also gain significant knowledge from its competitors in this market. The company can analyze the products of its competitors in the market that are sold the most, which would eventually support in understanding the tastes of the people in the city. Thus, the company should modify its products and services to a certain extent as per the tastes of the customers that would attract them to purchase (General Directorate of Civil Defense, 2017).

• Section 2 – Analyzing International Competitors

For the successful expansion and targeting of the new market in Amman, it is important for Alzamil to analyze its competitors. Analyzing the competitors will support in identifying the gap in the market that are not being met. This in turn would facilitate in attaining the market share to a considerable extent. Besides, analyzing the competitors would also support in understanding the strategies used by them, which significantly helps in framing the strategies of the company. In this regard, it is identified that the competitors of Alzamil in Amman are Nabil Factory for Food Products, Al Kasih Food Production, Noman Al Juneidi Food Industries, Jordan Modern Food Industries, Tarkhan and Son Ahmad, Al Wadi, Jordonian Dairy, Jordan American Food, Al Junaidy, Amra Factory, and Coca Cola Jordan among others. Thus, it is apparent that the city Amman has a significant number of food industries and companies that offer a variety of products. This also implies that the food market of the city is highly competitive. However, there are some of the products offered by these companies that are not of the superior quality. These include rice, edible oil, pulses and cereals, fresh vegetables and fruits, wheat, and molasses among others. Consequently, it is an opportunity for Alzamil to offer quality products of these categories, which in turn would ensure its successful expansion in the city. In addition, it is also identified that most of the food companies in Amman including Al Wadi have poor controlling and distribution of the products that in turn have limited its sales. On the other hand, it is evaluated that the distribution of Alzamil is highly sophisticated and structured, which in turn supports it in reaching a majority of the customers (Baqi, 2016).

• Section 3 – Assessing the Economic-Geographic Environment

The economic and geographic environment of the target market for business expansion also plays a crucial role. The evaluation of the economic environment ensures if the customers of the target market have the potential to afford in purchasing the product. Conversely, the analysis of the geographic environment enables in understanding that whether the company gets the advantage of natural infrastructures such as sea ports, rivers and others for the transportation of products. It also includes physical infrastructure such as roads and railways for transportation along with the uninterrupted supply of electricity that ensures continuous flow of production. In this regard, the European Bank for Reconstruction and Development supports the local along with the foreign companies in the region to grow its business and attain success. Amongst the varied companies that get support from the European Bank for Reconstruction and Development, food and beverage industries have been the most prominent. Thus, it is an opportunity for Alzamil to utilize the financial aid provided and ensure successful expansion. Moreover, the nominal Gross Domestic Product (GDP) of Jordan was $9.62 billion and the GDP per capita is $5,677.62 in 2016-17 (CEIC, 2017; Statista, 2017). Thus, it implies that the economic condition of the nation is satisfactory and the people have moderate purchasing power. Besides, it is also encouraging that the GDP rate is growing at 2.0% in 2017 that ensures the possible success in the market (Trading Economics, 2017).

The infrastructure of Amman and the other parts of Jordan is highly developed and modernized that ensures greater ease of doing business in the region. In this regard, the report of Jordan Economic Growth Plan 2018-2022 suggested that the transportation and Information and Communication Technology (ICT) is expected to grow at a rate of 12%, while electricity and water irrigation sector will grow at a rate of 13%. The construction sector is expected to grow at a rate of 15%, while the manufacturing sector and the agricultural sector at 10%. This implies that the infrastructure related to the food industries is anticipated to grow at a very higher rate, which in turn ensures business success in the region (The Economic Policy Council, 2017).

• Section 4 – Assessing the Social-Cultural Environment

Analyzing the social-cultural environment of the target market is extensively important for the planning of business expansion, as it largely influences the business process. In this regard, there are certain areas based on which the social-cultural environment is evaluated that includes demographic trends, cultural analysis, social institutions, and information trade barriers (General Directorate of Civil Defense, 2017).

4.1 Demographic Trends. The people of Jordan particularly in Amman are highly educated and have greater work skill. Thus, the human resource in the region is capable of sufficing the needs of the customers. In addition, the country also provides human resource at a comparatively lower cost, which in turn increases the profitability of the company. On the other hand, the higher educated people in the city also ensure that they will be able to accept the modern food products (General Directorate of Civil Defense, 2017).

4.2 Cultural Analysis. Jordan is a multi-cultural nation which is prominently notable in the capital city Amman. People of varied nations and cultures including that of Saudi Arabia and the UAE live in the city. Besides, the city is a highly tourist attracting region, thus a considerable number of people are from varied cultures. Thus, it led to the acceptance of multicultural traits among the people in Amman, which in turn ensures the success of foreign brands and products. In addition, the city has a very high number of Sunni Muslims and some minor Christians. The city has a very high number of Mosques and a few Churches. The official language of the nation is Arabic and a considerable number of people can speak English. Thus, Alzamil which has the vision of expanding in Amman will not have a major issue with respect to social environment. However, the religious beliefs, customs and traditions confine some of the food products to be restricted in the city that include pork, poppy, and others (General Directorate of Civil Defense, 2017; Public Intelligence, n.d.).

4.3 Social Institutions. There are many social institutions in Amman, which contribute to the community development. The Ministry of Social Development in the city is the supreme authority in this aspect and focuses on education, healthcare treatment and other basic needs to be sufficed by all the people. The greater social development ensures the higher affordability of the people, which in turn ascertains business success. The labor organizations in the city are not extensively strong and do not work against industries. Jordan reflects a collective social structure, thus it has many family based businesses. Moreover, as a result of the collective social structure, the success of business significantly depends on the word-of-mouth by its customers (General Directorate of Civil Defense, 2017).

4.4 Informal Trade Barriers. Alzamil does not have major informal trade barriers with that of Amman, as a majority of the people in the region are Sunni Muslims along with a very few Christians. The official language in the nation is Arabic, hence Alzamil, which is a Saudi Arabian company would not have major issues in communicating. Besides, there are considerable number of people in Amman who can speak and understand English language (General Directorate of Civil Defense, 2017).

• Section 5 – Assessing the Political-Legal Environment

The political environment of Jordan especially in Amman is very stable that encourages the business enterprises for investment. The government of the nation has taken many steps to boost Foreign Direct Investment (FDI) and to ease business processes with other countries. In this regard, the government of the nation has taken proactive steps to enjoy the membership of European Union (EU). It is also one of the members of Euro-Mediterranean free trade along with the founding member of Organization of Islamic Cooperation (OIC) and Arab League. The legal system of Jordan is based on the French code of law and is also influenced by the Egyptian civil laws. The Islamic law in the nation is only limited to the civic issues. Thus, the legal environment in Jordan related to business environment is not archaic and does encourage friendly business environment (Khader & Badran, 2014).

• Phase 2 – Organizing for Global Business Activities
• Section 6 – Selecting a Global Company Structure

Alzamil, to attain success in its vision of expanding the business process Amman, is required to frame some of the strategic business objectives. This will direct the company to be focused towards its goal and attain the desired market share and the financial aims. The strategic objectives of the company are depicted below:

• To work with a reputed external market researcher for 2 years
• To work with suppliers in Saudi Arabia and Jordan for 3 years
• To manufacture 50% of the products from Amman and the rest 50% export from Saudi Arabia for a year
• To manufacture all the products from Amman after a year
• To extensively target the Saudi Arabian customers in Amman for a year and attain 10% market share and sales revenue of 1 billion USD
• To target all the customers in Amman after a year and achieve 20% market share along with the sales revenue of 2 billion USD
• To work with 5 distributors for a year and subsequently 10
• Section 7 – Financing Sources for Global Business Operations

Determining the source of finance for Alzamil in its business expansion in Amman is a crucial factor as it leads to the effective conduct of the business process. The start-up cost of the company should be 2 billion USD. In this regard, the company should use various financing sources. The retained earnings should be majorly used by the company, as the company is already operating in Saudi Arabia and earning significant profits. Besides, retained earning has lower risks and does not require interest or dividend payment. The company can also sought finance from banks. Although the finances from banks are easily available for the companies, it is indeed relatively costly. In addition, the company also has the option of issuing shares that can be both equity shares and preference shares. The company can also opt for issuing debentures. Besides, one of the major financing sources that Alzamil can enjoy is the European Bank for Reconstruction and Development. The bank provides cheap finances for the companies in Jordan and other European countries. The bank not only offers finances to the companies but also supports in the business development. Furthermore, the company also has the option of financing commercial papers. However, commercial papers are for short-term which generally ranges from 3 months to a year (Gabrielsson, Sasi, & Darling, 2004).

• Section 8 – Creating a Global Management Information System

Information is regarded as one of the major assets of a company, based on which it can take vital decisions and frame strategies to attain its goals and objectives. Information is also important for the financial planning of the company along with the management of inventories, human resources and operational processes. Besides, along with the availability of information, the establishment of effective information system is also crucial. This supports in analyzing the information and supports in quick availability of proper information during emergencies or short time. In this regard, it is necessary for the organization to establish an information technology based Enterprise Resource Planning (ERP) that supports companies in decision making and business process based on the financial information, inventories, raw materials and others. Thus, the company should also update all the quantifiable and non-quantifiable information in its network, which include raw materials, inventories, financial statements, customer feedback, and distributors’ performance among others. The information system should support all the members of the company as well to communicate with each other for the organizational growth. The information provided by the lower level employees to the higher managers would support the company to identify and resolve the ground level issues. Moreover, it also supports in effective communication of the organization with that of the distributors and suppliers, and thereby ensures efficient conduct of business operations (Laudon & Laudon, 2013).

• Section 9 – Identifying Human Resources for Global Business Activities

Human resource is regarded as one of the key components for any organization. The performance of the human resources ensures greater productivity of the company and thereby supports in sufficing the customers’ needs. Alzamil is planning to expand its business in Amman, hence it needs to possess different human resources. Among the different human resources of the company, one of the crucial members is the top level managers. It also includes middle level managers and the managers of lower level. It also entails the departmental managers along with the suppliers from Jordan and Saudi Arabia. The distributors also play a vital role in the business process as they largely support the company to reach the customers in an effective and efficient manner. The promotion and advertising department of the company attempts to promote the product and communicate with the customers. The employees in the finance department ensure that the company receives cheap finance and is able to ascertain the continuous flow of money for the effective production process. External and internal audit members are also required in the organization in supervising the recordkeeping process and ascertain accuracy. The Research and Development (R&D) team and engineers are required in the organization, who identify the needs of the customers and correspondingly attempt to produce new products or modify accordingly. The laborers who directly work to manufacture the specific food product are also amid the crucial members. The number of laborers required in the organization is very high in comparison with that of the human resources in other categories (Miles & Snow, 1984).

• Section 10 – Managing International Financial and Business Risks

Every business has certain risks, which increases when the business operations are conducted in the international level. However, in this context, Alzamil has lower business risks while operating in Amman. There is no major restriction in the import of finished products and supply of raw materials from Saudi Arabia that Alzamim deals. However, in future, if certain restriction arises, the company should manufacture the product within Jordan. Besides, one of the strategic objectives of the company is to manufacture all the products from Jordan after a year, which would eventually support in reducing the organization cost and thereby lowering its financial risks. The economic condition of the nation and particularly the capital city is very attractive, however in future the country can face economic turmoil that in turn can affect the company’s sales value. Despite that it would not affect the company, as it can sell the products in other European countries where the trade barriers are very low. Moreover, for other risks such as adverse political conditions, corruptions, poor business regulations, degraded infrastructure, and volatility in currency, the company should get its business insured. In addition, the company also has the risk of changing tastes and preferences of the customers. In this regard, the company should conduct extensive market research that can be both internal and external. The hiring of proficient R&D team and engineers would support in ascertaining innovation and thereby facilitate to meet the changing customers’ needs. The company should also hire local managers who have considerable experience in the food industry in Amman (Miller, 1992).

• Phase 3 – Implementing the Global Marketing Plan
• Section 11 – Product and Target Market Planning for Foreign Markets

Alzamil has been in the food industry for a considerable time in Saudi Arabia, hence it does not require to manufacture new products for the expansion in Amman. However, the products need to be modified as per the tastes and preferences of the customers in the city. Nevertheless, if after conducting market research, the company identifies varied needs of the customers, it can then manufacture new products accordingly for the target market. The company has a range of food products and targets almost all the segment of customers. However, for the first year, it would extensively target the Saudi Arabian customers in the city. Correspondingly, it would target all the customers in the city including the local people. Alzamil mainly deals with the meat products which include beef, chicken, fish and various cold cut products. The company manufactures around 6 types of beef products, 16 types of chicken products, 8 forms of cold cut products, and 2 varieties of fish products. Thus, the company has a wide variety of fish and meat products. The frozen and packaged meat products are exported to various nations. Besides, the company also offers dairy products that include cheese, yoghurt, butter, condensed milk and others. It also offers various types of poultry products. These various categories of food products will also be targeted among the customers in Amman. These products will also be targeted extensively among the young professionals who stay alone in the city. The reason behind such is that these food products are easy to prepare, hence would largely attract the young professionals (Zamil Foods, 2017).

• Section 12 – Designing a Global Distribution Strategy

Alzamil has the reputation of well structured and effective mode of distributing its food products to its customers, which eventually gives competitive advantages to the company. The food industry in Jordan and particularly in Amman is very competitive. However, most of the organizations in the city do not have effective and efficient distribution, which in turn affects their sales volume and profit. Thus, it is an opportunity for Alzamil to utilize its potential in the product distribution system and consequently attain its desired market share. In this regard, the company aims at working with 5 distributors or wholesalers who are highly experienced in the food market of Amman. Consequently after attaining the 10% market share in the city within a year, the company will target to work with more 5 distributors or wholesalers. The food products of the company will be available in the large retail stores along with the small retailers of every street. The transportation of the products to the wholesalers will be through the company vehicles that have cold storage system. This is to ensure that the products do not get affected during the transportation process. The company would also offer inverse distribution process in case of the products get damaged before delivering it to the customers. In such cases, the customers can deliver the damage product to the retailers, which are then transferred to the company via the respective wholesalers. The company can open its own outlets within the city for distributing the products to its customers; however it is relatively costly, thus not advisable at the initial stages of expansion. Besides, the company will also import some of the finished products from Saudi Arabia. Although the nation does not have significant trade barriers, the products of the company will require clearance from Ministry of Health, Ministry of Agriculture, and Customs Department in Jordan. The company will also require some of the title of certificates that include Country of Origin Certificate, Fitness for Human Consumption Certificate, and Halal Certificate among others. However, apart from the clearance from Custom Department and Country of Origin Certificate, all other clearances and certificates are mandatory for manufacturing and distributing the products in the nation (Kahn, 2015).

• Section 13 – Planning a Global Promotion Strategy

Framing effective promotion strategy is a very crucial aspect to attain successful expansion in the target market. Promotion is required as it would ensure awareness about the new brand along with the different attributes of the product and the price. The company will mainly communicate to the customers about the superior quality of the products that it offers in comparison with its customers, which is mainly to gain competitive advantages. The company will use various promotional tools such as television, newspaper, magazines, banners, hoardings, and the internet among others. The company will hire advertising agencies for producing promotional videos, graphics, and others. Although the promotion through television is very costly, it is regarded as the most effective tool. Promotion through television is highly appealing and reaches to a wide range of customers in the target market. In addition, online promotion is also considered as one of the most useful tools for promoting products and services. Online promotions have a great reach as a majority of the people in the city is available in various social media platforms and other websites for a considerable period of time. Online promotion is less costly in comparison with television advertisement. Besides, the target customers also include young professionals in Amman, who remain available in the online media for a relatively greater period of time (Kahn, 2015).

• Section 14 – Selecting an International Pricing Strategy

The appropriate selection of price for products is regarded as one of the vital decisions that a company considers which in turn determines its success. The selection of lower price for products leads to reduced profitability, but it also ensures greater market share. On the other hand, higher pricing that is beyond the purchasing power of customers or higher than that of the customers leads to lower market share. Thus, it is important for the company to select appropriate price that would lead to the attainment of strategic objectives. In this context, Alzamil has the strategic objective of attaining market share of 10% with annual revenue of 1 billion USD for the first year, and correspondingly 20% market share with annual revenue of 2 billion USD from the second year. Thus, considering the higher sales revenue and market share, the company should place the price of its products similar to that of the competitors, while in the second year the company can increase the price by 5 to 10% to earn greater revenue. This pricing strategy for the new company in Amman can be justified by the fact that Alzamil would offer superior quality along with extensive promotions, which would certainly attract targeted customers. In addition, there are certain factors that increased the cost of the product, which include the additional import duty for some of the products, higher cost of finance for the business expansion, high priced with greater quality raw materials, the initial training cost to the employees, extensive promotion, and market research among others (Kahn, 2015).

• Phase 4 – Global Financial Planning and Control
• Section 15 – Determining Financial Results

Alzamil in its business expansion in Amman is expected to earn total revenue of 1 billion USD for the first year. However, it would not derive any profit for the company in the first year, as the cost of investment is higher in the first year. The company is expected to meet the break-even point in the second year, which would provide higher revenue and relatively lower cost. The return on investment would gradually increase from the third year onwards. The total cost of the company in the first year would be 1.8 billion USD as a result of the greater fixed cost along with training and extensive promotion cost. The total cost in the second year will be 1 billion USD, while the revenue earned will be 2 billion USD. Thus, the company will earn 200 million USD after two years of business. The revenue of the company in the second year will increase as a result of the augmented market share from 10% to 20% along with the increased pricing up to 5-10% (Kahn, 2015).

• Section 16 – Measuring International Business Success

The success of international business not only depends on the financial profits, but also the social and economic influences on the host nation. In this context, the company is expected to earn a profit of 200 million USD after the second year and the return on investment will increase from the successive years. The company is expected to increase its market share up to 20% in the 2nd year, while the sales revenue will increase to 2 billion USD. The business process will create new jobs for the people of Amman, which will further increase in the 2nd year when the entire manufacturing will be from Jordan. The economic benefits also include the improved infrastructure particularly in the distribution process along with the efficient use of local natural resources. Moreover, the social benefits include training to the employees along with offering housing facilities. The company will also ensure that there is no social cost such as increased pollution and decrease in natural resources (Kahn, 2015).